RIM has some tough decisions to make

Malik Saadi/Informa Telecoms and Media
02 Jul 2012

Last week RIM released its first-quarter results for the 2013 financial year. The company’s revenues have declined for the fourth consecutive quarter to reach $2.8 billion, or a 33% decline compared with the previous quarter.

The company reported its first quarterly operating loss in more than seven years with a net loss of 18.5%.

However, not all parts of its business are performing badly. The company made an honorable profit from its services but it has made a dramatic loss from its hardware. This is due to the decline of both volume shipments and the average selling price of Blackberry smartphones.

The company managed to ship only 7.8 million smartphones this quarter compared to 10.7 million recorded last quarter. The average selling price of Blackberry smartphones declined to $218, from $258 last quarter.

During the call RIM’s CEO Thorsten Heins confirmed that BlackBerry 10 (BB10), the company’s next generation platform, will not be available the first quarter of 2013 calendar year. This means investors should expect an ongoing bad performance from RIM, at least for the next three quarters.

Now it is strongly questionable RIM could maintain its cash position during this period and execute its strategic plans without making some painful decisions of exiting parts of the market they service.

It is becoming clearer than ever that the company needs to wave goodbye to hardware and focus more on delivering services and licensing software. This quarter’s results have effectively confirmed that RIM can no longer afford to be a wholly vertical company with a fully integrated business model. From now on, any underperformance by the devices part of the organization would mean a significant churn of current BlackBerry users, which could lead to the collapse of the whole business including services.

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